When trading on the foreign exchange Sydney market you should consider the different lot sizes available. A lot size will play a large role in your trading, particularly in which risk management strategies can be used. When choosing a lot size you should consider your trading requirements. The general rule is that you use a smaller lot size; however you may prefer a larger one according to your trading needs. In order to determine which is most appropriate you know what lot sizes are on offer and how to trade with them.
The micro lot
The micro lot is the smallest of the different lot sizes. It is available via forex brokers and holds 1,000 units of currency. This means that if you are trading with British pounds in your trading account the micro lot will consist of £1,000. This micro lot is recommended for the new trader as the smaller size ensures that you won’t face account depletion if you lose a trade. It also reduces the amount of risk on a trade. When trading with micro lots you will see a single pip equal 0,1 units of your trading account currency.
The mini lot
Before the introduction of the micro lot the mini lot was the most popular choice for beginner traders. These lots are ten times larger than micro lots presenting with 10,000 units of currency. This means that each pip in a mini account has a value of 1 currency unit. The mini lot is no longer the recommended option for new traders, however if you have a large amount of capital then you should consider looking at this lot. The start up amount for this type of lot is 2,000 currency units.
Mini lots present with a great amount of risk, much greater than that of the micro account. The reason for this is that the market moves around 100 pips per day. This means that on one trade you may be risking 100 units of your account currency. This sort of loss can be detrimental to any new traders who do not have large trading funds.
The standard lot on the foreign exchange Sydney market
The standard lot is the largest of all three options available. You should only considering trading with these lots if you have experience on the foreign exchange Sydney market. You will also need a large account balance as the start up capital required is around 25,000 units of currency. If you do not have this amount in your trading account you will be required to use leverage when executing trades. Leverage increases the risk of a trade which can be detrimental when using a standard lot.
The size of a standard lot is much bigger than the mini and micro lot as it holds 100,000 units of currency. A single pip in this lot is equivalent to 10 units of currency. This means that you could lose a minimum of 100 units if the market moves 10 pips.
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